LEVY, SPIELBERG TAKE AN LA DIVE $7-MIL. BET ON HIGH-TECH HOAGIES

LOS ANGELES-Larry Levy doesn't need the working periscope just inside the front door of The Dive to see the future of his latest restaurant venture.

The Chicago restaurateur is certain the submarine-themed eatery-built with the creative and financial backing of film director Steven Spielberg and Walt Disney Studios Chairman Jeffrey Katzenberg-is the first in a fleet that will eventually drop anchor in 60 cities in the U.S. and abroad.

Opening Wednesday in one of L.A.'s swankest neighborhoods, The Dive seeks to emulate the successes of the Hard Rock Cafe and Planet Hollywood by offering food, atmosphere and an extensive line of retail merchandise.

"On Wednesday, we're launching an international brand," Mr. Levy declares. "Everything we've learned about restaurants and everything we've learned about entertainment comes together in The Dive."

It's a new and expensive direction for Levy Restaurants, of which Mr. Levy is chairman and his brother, Mark Levy, is vice-chairman. For the past five years, the company has focused on "specialty concessions," at venues such as Comiskey Park and Disney World, rather than stand-alone restaurants.

Though The Dive seats just 350, it cost a whopping $7 million to build and equip, more than three times what it cost to create Chicago's Spiaggia in 1984, previously the costliest of the Levy restaurants. The Dive will have to generate an-nual profits in the $2.5-million range if investors are to get their money back within the industry target of three years.

And despite the cachet of the big names involved, there is always a chance the concept won't fly. After all, Mr. Spielberg's other submarine project-the NBC action series "seaQuest DSV"-languishes in the deep waters of TV ratings.

But if The Dive strikes a responsive chord with the public, the sales potential will be explosive.

"This is an emerging segment: the entertainment-based restaurant," says Ron Paul, president of Technomic Inc., a Chicago-based restaurant consultancy.

Construction on a second Dive restaurant, in Las Vegas, will begin in June with Mirage Resorts Chairman Steve Wynn joining Messrs. Levy, Spielberg and Katzenberg as an equity partner. The restaurant will be across the street from Mr. Wynn's Treasure Island resort and casino and will boast 15 slot machines with a Dive theme.

The third restaurant is likely to open in New York next year, and the search for sites in Tokyo and London has already begun. Mr. Levy says The Dive will arrive in Chicago in two or three years.

"Ultimately, (The Dive) will probably become a different company (separate from Levy Restaurants)," Mr. Levy notes.

The restaurants, he adds, will be built primarily by joint ventures, which are likely to include new partners in every market. It's a strategy of shared risk that doesn't tie up large amounts of capital at Levy Restaurants, which last year had revenues of $97.5 million. Merchandise sales

Mr. Levy estimates, and independent restaurant consultants concur, that the L.A. eatery will do at least $15 million in sales annually. At least 30% will come from merchandise-from a $580 leather jacket to a $7 beer glass-emblazoned with a logo of a pastel submarine cruising above the words: Dive! Deep. See. Experience.

While Mr. Levy acknowledges that Hard Rock Cafe and Planet Hollywood are progenitors of The Dive, he insists there is a significant difference: "Hard Rock and Planet Hollywood are entertainment venues with a food component. This started as a restaurant.

"What the California Pizza Kitchen did for pizza, we want to do for the submarine sandwich," he adds, "but integrated into that is the entertainment function of being inside a submarine." Submarine styles

The menu lists 19 types of submarine sandwiches, from a traditional Italian to a Tuscan turkey sub to three vegetarian choices. Sandwich prices range from $7.95 to $11.95. The Dive will also sell other entrees including burgers, pastas and salads.

"The star of this restaurant is the food," Mr. Katzenberg insists. "The fact that this comes in an incredibly and theatrically wrapped exterior is, I think, less important than the quality of the food. That's what people will remember about the place."

Nonetheless, it's the submarine trappings that are likely to be the initial draw.

The theme starts outside, where the nose and conning tower of a submarine jut from the wall of the Century Plaza Shopping Center, and extends throughout the 11,000-square-foot eatery, which sprawls over two floors.

Patrons enter through a hatch-shaped doorway. A swiveling periscope offers views of the nearby surroundings. Windows resemble portholes. Bar stools are torpedoes topped by round targets. The no-nonsense, metallic style extends even into the bathrooms, where the fixtures are stainless steel rather than porcelain.

But the centerpiece of the restaurant is a 30-second dive sequence staged every 45 minutes. Alarms sound, lights flash and gauges whirl while water bubbles and surges over the porthole-shaped windows. A wall of video monitors, which ordinarily show dreamy underwater sequences, display the foaming, agitated water created by a submarine as it slides beneath the waves.

Mr. Levy's involvement with The Dive is deep and passionate.

"This is the most excited and the most confident I've ever been," says the 50-year-old restaurateur, who's been in the business for 18 years. "This has totally energized me."

But his efforts are almost universally ignored in La-La Land, where the restaurant is considered a project of Mr. Spielberg.

"It's all, 'Have you heard about Spielberg's restaurant?'" says Merrill Schindler, who's covered the Los Angeles restaurant scene for more than 10 years on KABC-AM radio. "And, 'Oh yeah, there's some guy named Levy who's doing the food.' It's nice if the food is good, but people are really going to these kinds of places for the experience."